South Stream will stay Southward

Russia’s Gazprom is to make radical changes to its South Stream gas pipeline project to Southern Europe.

The gas monopoly has decided to completely by-pass Austria’s East European gas hub (CEGH) and terminates the pipeline in Northern Italy. The proposed southern leg of the pipeline through Greece to Italy will be abandoned.

The changes mean Austria will no longer take part in the project, even though Gazprom and Austria’s OMV signed a joint venture agreement last year. As part of the deal Gazprom would have acquired a 50% stake in the CEGH.

The CEGH has large underground reservoirs, and already serves as a major transit point for Russian natural gas imported into Europe.

The European Commission wanted to block the deal, which the Deputy Chairman of Gazprom Alexander Medvedev described as ‘unacceptable’.

Austria has been actively lobbying for the rival European gas pipeline called Nabucco, which is aimed at reducing the reliance on Russian energy supplies.

The new route sees the South Stream pipeline going through Bulgaria, Serbia, Hungary, and Slovenia, finally ending up in Italy.

“The country that provides the route for Gazprom pipes can enjoy better development: may be some future discounts, may be some privileges etc. Obviously it’s a win-win situation. It’s a pure commerce and I think Italy in the way it finds itself right now may be offering Gazprom better rates”, says Vladimir Rozhankovsky at Nord Capital.

Bulgaria has confirmed its participation in the project, with the Government giving it national project status.

Greece, Serbia and Croatia, will be customers and have access to gas from the pipeline.